Airlines ground 20% of schedule; workers laid off

From Wire Reports

Airlines imposed drastic cutbacks yesterday in an effort to avoid bankruptcy after last week's terrorist attacks, with three major carriers slicing schedules by 20 percent and Continental Airlines laying off 12,000, or one-fifth of its work force.

The industry, already hurting from the economic slowdown, is expected to lose billions of dollars before the end of the year. Analysts and airline executives say that without a huge bailout from the federal government, even the largest carriers could go out of business.

"These actions are a direct result of the current and anticipated adverse effects on the demand for air travel caused by this week's terrorist attacks on the United States," Continental said in a statement. The airline said the costs of drastically increased security requirements also forced it to cut back.

Continental Chief Executive Gordon Bethune said the Houston-based carrier could file for bankruptcy protection by late October if Congress does not provide immediate assistance to the airline industry.

"We're taking immediate steps to preserve all the cash we had going into this debacle," Bethune said, estimating that Continental had about $800 million on hand. "We are doing this in survival mode."

The attacks have caused $1 billion more in U.S. industry losses on top of substantial ones already booked for 2001, Bethune said, and forecasts are for a 50 percent drop in traffic. "The U.S. airline industry is in an unprecedented financial crisis," he said, predicting 100,000 layoffs industrywide.

Continental is the nation's fifth-largest airline and has more than 56,000 employees.

The Bush administration said yesterday that Transportation Secretary Norman Y. Mineta would meet with airline executives as early as tomorrow to discuss options.

American Airlines and Northwest also said they would run 20 percent fewer flights than they did before Tuesday's attacks. Neither carrier specified how many jobs would be affected.

Analysts predict the industry will lose between $4 billion and $7 billion in 2001 because of the public's increased fear of flying, the shutdown in air travel over the past few days and the fewer flights and higher costs associated with new airport security measures.

"The airlines simply won't be able to do what they're being asked to do without financial support," said Helane Becker, an analyst at Buckingham Research.

Bethune said at a news conference that the U.S. airline industry is losing about $300 million per day. Continental is losing $30 million per day. In the past four days, the airline said, it has seen a "drastic" drop in bookings.

"Our industry needs immediate congressional action if the nation's air transportation system is to survive," Bethune warned.

House Majority Leader Richard A. Gephardt said he expected there would be legislation to help U.S. airlines struggling with liquidity problems. But that assistance might not be assured. In Washington yesterday, a bipartisan group of lawmakers failed to push a plan to aid airlines through the House of Representatives.

Supporters of the proposal, authorizing $2.5 billion in grants and $12.5 billion in loan guarantees, sought to get the measure approved on a fast-track to send a signal to financial markets reopening tomorrow that Congress would try to cushion the economic effects of the devastating assaults.

Rep. Lloyd Doggett, a Democrat of Texas, said it was wrong to authorize subsidies to an industry so soon after the devastating attacks.

But House supporters of the aid package said they might try again, though votes were not expected before Thursday.

In the Senate, Commerce Committee leaders were crafting legislation that would limit lawsuits against United Airlines and American. In a statement, Sen. John McCain of Arizona, the committee's ranking Republican, promised to "do everything in my power to ensure that Congress will act to stabilize the financial condition of the airlines as we begin to rebuild from this tragedy and restore our nation's confidence in flying."